The lecture was sparsely attended at the Wolfsonian on Miami Beach last night by Dr. Minh A. Luong, assistant director of Yale University's International Security Studies. But the atmosphere was crackling. Miami doesn't get to hear unvarnished news about China and its 1.33 billion people too often. It was an eye-opener.
Dr. Luong is a well known academic expert on current trends in China. His lecture was titled, China in the 21st Century. Luong challenged the popular notion that China will become the world's next superpower. The bottom line: China's economy is in a much deeper crisis than reported. Despite local tensions (ie. the naval confrontation in the China Sea, yesterday), Chinese officials believe their economy, and perhaps even the fate of their government, is tied to economic recovery in the United States. In the fourth quarter of 2008 and first quarter, electricity production in China fell off a cliff. GDP is sharply declining. Unemployment is soaring: the unofficial rate, nearly 18 percent today, is nearly double the official, reported rate. Incidents of social unrest (defined as crowds of more than 250) are at 238 per day. According to Luong, China has a quickly dwindling capacity to absorb more US debt. For now, Luong says, both the Chinese and Russian governments are urging wealthy industries to buy more government bonds, to fund more purchases of US debt.
Luong says that the China's GDP is scarcely half of the US GDP total, but its debt is much lower as a percentage of GDP, only 17 percent compared to ours; more than 60 percent by the end of 2008 and quickly rising.
My note: If economists are right and the trillion dollar fiscal stimulus by the Obama administration is too small by half (Krugman, Shiller), it is hard to imagine that China's promised $545 billion fiscal stimulus can help revive a national economy whose population is four times the size of ours.
2 comments:
"If economists are right and the trillion dollar fiscal stimulus by the Obama administration is too small"
All economist? Or just the ones you think are right? Did you miss the open letter in the NYT signed by hundreds of prominent economist saying Obama's stimulus package was too much spending?
Now you'll call me a Republican? (I'm not)and go into some partuisan tirade or someone will qoute Keynes whose easy money quick fix under Greenspan mad money and Bush Administrations deficit spending (A perfect Keynesian prescription)got us into this mess in the first place.
This huge debt that Bush has run up to the Chinese makes me nervous. I think Obama needs to create a bond program for everyday Americans to pay off the debt. He needs to come to us, explain the situation, and ask us to buy these bonds just as we do with payroll savings. If the denominations are small enough, one could buy a bond each pay check, and before you know it, collectively, we could be out of debt to these people. I would rather owe us, than some other country. Once we get it cleaned up, future administrations should be prohibited from going in this direction. Like the rest of us, when the money runs out, stop spending.
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